When planning for the future and its inherent uncertainty, knowing your family is protected with a good life insurance policy offers peace of mind. Life insurance helps surviving members of a policyholder’s family in many important ways; however, every person’s needs are different, which means every policy is different. To get the most out of life insurance, it is critical to understand how such policies work and how significant provided benefits can be for surviving family members.
What Is Life Insurance?
Life insurance is an insurance policy that pays a death benefit to named beneficiaries when the policyholder dies. There are many different types of policies that offer various benefits; however, their main purpose is to pay a certain sum of money to those named in the policy at a time when it is likely most needed.
Who Needs Life Insurance?
Not everyone needs life insurance, although almost anyone can purchase a life insurance policy. Those who stand to benefit the most from this type of policy are those with dependents such as a spouse and children. Beneficiaries who receive payment as a result of the policy are usually family members; however, business partners can sometimes be included as beneficiaries.
Types of Life Insurance
Purchasing the best life insurance product is important. Therefore, it is essential to understand the different types of policies offered:
Term Life Insurance – This is a policy that usually has a set premium over the life of the policy; cost is based on the age of the policyholder when the policy is initiated. Term life insurance covers a person for a specific period of time and are renewable; however, it only provides death benefits for the stated amount purchased. Term life insurance can be converted into a permanent policy
Permanent Life Insurance – : Whole and universal life policies automatically renew as long as premiums are paid; premiums are higher than those of a term policy. Both types of permanent life insurance policies pay a death benefit, and may offer loans and/or pay dividends to the policyholder.
There are also individual and specific life insurance products that can be purchased at specific times – such as credit life insurance, accident and health insurance, and prepaid funeral insurance – as well as group policies that may be offered through an employer and other organization.
Life Insurance Benefits
Depending on the individual policy, life insurance policies pay death benefits to named beneficiaries as a lump sum or as regular payments according to the terms of the policy.
Regardless of how it is paid, this money is a critical benefit for surviving family members. It provides survivors with money that in many cases is necessary to pay for funeral bills and daily living costs. It often allows a surviving family to maintain a similar standard of living, even after the policyholder’s death. Permanent life insurance policies, such as whole or universal, can provide financial benefits while the policyholder is still living.
Anyone with a family and loved ones who dependent upon them for all needs should consider purchasing life insurance to provide financial help when the policyholder is gone. To learn more about the different life insurance products available and which is best for your needs, contact an insurance company today – tomorrow may be too late.